Salisbury Bancorp, Inc. operates as the bank holding company for Salisbury Bank and Trust Company that provides commercial banking, consumer financing, retail banking, and trust and wealth advisory services. Salisbury Bancorp is one of United States’s small-cap stocks that saw some insider selling over the past three months, with insiders divesting from 3.47k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Who Are Selling Their Shares?
There were more Salisbury Bancorp insiders that have sold shares than those that have bought. In total, individual insiders own less than one million shares in the business, or around 12.55% of total shares outstanding. The insider that recently sold more shares is Michael Gordon .
Is This Consistent With Future Growth?
From the outside, there are dark clouds on the horizon for Salisbury Bancorp. Probing further into annual growth rates, analysts anticipate negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. However, next year’s earnings are expected to exhibit double-digit growth at 30.0% which may mean the company’s cost-cutting initiative will be significant enough to more than offset negative revenue growth. Insiders may view this initiative as unsustainable leading to net selling of the company’s shares. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Stock Price Volatility Instigate Selling?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Within the past three months, Salisbury Bancorp’s share price traded at a high of $48.44 and a low of $40.36. This suggests some volatility with a share price change of of 20.01%. Insiders’ purchases may not be driven by this movement but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.
Salisbury Bancorp’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, however, this is rather cautious relative to analysts’ earnings expectation, and the share price movement may be too trivial to cash in on any mispricing. However, it’s important to keep in mind, insider selling may not necessarily be based on their belief of the company’s ability to perform in the future. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two fundamental factors you should further examine:
- Financial Health: Does Salisbury Bancorp have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Salisbury Bancorp? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.